At long last due consideration for First Time Buyers: UK Budget 2010

Deloitte's commentary on the Budget 2010

This Budget has two themes for business: a package of support for small business and the threat of potential tax increases for employees who receive some types of shares in their employer.

The small business support package includes:

A one-year holiday from business rates for properties valued up to £6,000, with transitional relief for properties valued up to £12,000. This will apply from October 2010 and is hoped will benefit 345,000 small businesses.

Extension of the Business Payment Support scheme for a further five years. This has benefitted over 168,000 businesses, but 80% have made multiple, or repeat applications.

Doubling the Entrepreneurs relief limit to £2 million – gains up to this level are taxed at 10%.

Boosting by 15% the Government procurement opportunities open to small business.

Doubling the Annual Investment Allowance to £100,000 – potentially saving about £15,000 for a tax-paying business.

Introduction of a tax-break for the video gaming sector.

The Budget also announced possible limitations on companies using Employee Benefit Trusts and Growth shares to remunerate employees. Both these measures will be consulted on during the summer, with possible changes introduced in 2011. Working out the boundaries between income and capital gains for employees has been a continuing difficulty over many years.

It's disappointing that there isn't a Consultation document on the Patent Box regime. This is due to be introduced in 2011 and the Consultation won't start formally until the summer. This won't leave much time to sort out issues in a potentially attractive and competitive regime.

A further disappointment is that the Government has chosen to ignore all the representations over restrictions on pensions tax relief for higher earners.

For individuals, the increase in the SDLT threshold to £250,000 for two years for first time buyers will be appreciated – it should help over 200,000 buyers each year. There will be a new 5% threshold on residential property over £1 million, arriving in April 2011.

“For the consumer this appears to be a relatively pain free budget with lots of businesses supported from film making to energy, and some good announcements for first-time buyers, too. In fact I think it is only cider makers and big earning bankers who will be really unhappy – but I guess this close to the election that’s what we should expect.The question all this asks however given the government finances is can we really afford it?”

Commenting on this year’s tax bonus:

“The Chancellor is clearly setting out now that global rather than national action is required to tackle banking regulation. This year’s bonus tax raised £2bn, but in future it is likely to be a global fund. This could be an extremely controversial long term project with the electorate: how will they feel if our taxes in year’s to come are used to bail out the economies of countries such as Greece or Iceland?”

Commenting on the housing market;

“First time homeowners will see stamp duty removed for purchases up to £250,000, a move that will be welcomed by a large portion of the electorate: first-time buyers and their parents, who often help out in purchasing a first home for their children. Those looking to sell their homes worth less than £250,000 in a stagnant housing market will also welcome the news, but anyone sitting on a property valued at more than £1million will be disappointed by the increase to 5% of stamp duty charges.”

Commenting on Universal Bank Accounts:

“A well trailed proposal, and one that makes sense given the banks influence over the banks at present. What is perhaps surprising is that the government are not doing more of this — after a couple of government inquiries which failed to really understand whether banks are profiteering from SMEs is this not an ideal chance to have the bonnet up in the state owned banks so reasonable levels for charges and fees can be set and enforced across the whole industry?”

Commenting on SMEs:

“The new fund to be established to help SMEs grow – part funded by banks, along with a range of extra support for small businesses, such as delaying taxes, cutting business rates for a year and increased investment allowances, are all steps in the right direction.”

“The government leaning on the banks to accept their responsibility to SMEs can only be good news, too. The £94billion outlined in available loans to SMEs will undoubtedly have a knock on effect to businesses and hopefully stir growth. What will be interesting though will be the pricing of these facilities — small business cannot afford to borrow at any cost, so pricing is critical for this to work.”

Notes:

Mark Bower, Founder and Director of Moneymaxim.co.uk is available for interview.